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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Vonage Holdings Corp was 0.99. The lowest was -5.34. And the median was -3.01.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Vonage Holdings Corp for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 1.0482||+||0.528 * 0.9805||+||0.404 * 1.0265||+||0.892 * 1.0324||+||0.115 * 0.8562|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9697||+||4.679 * -0.1035||-||0.327 * 1.1114|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $21.2 Mil.|
Revenue was 219.73 + 214.601 + 214.737 + 218.882 = $868.0 Mil.
Gross Profit was 148.687 + 128.959 + 155.702 + 157.047 = $590.4 Mil.
Total Current Assets was $133.9 Mil.
Total Assets was $678.0 Mil.
Property, Plant and Equipment(Net PPE) was $46.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $53.2 Mil.
Selling, General & Admin. Expense(SGA) was $474.0 Mil.
Total Current Liabilities was $165.4 Mil.
Long-Term Debt was $157.9 Mil.
Net Income was 7.469 + 5.604 + 4.556 + 5.518 = $23.1 Mil.
Non Operating Income was -0.577 + -0.01 + -0.002 + 0.036 = $-0.6 Mil.
Cash Flow from Operations was 10.724 + 31.309 + 27.764 + 24.082 = $93.9 Mil.
|Accounts Receivable was $19.6 Mil.
Revenue was 220.733 + 211.22 + 203.984 + 204.776 = $840.7 Mil.
Gross Profit was 151.574 + 125.56 + 141.567 + 142.032 = $560.7 Mil.
Total Current Assets was $122.1 Mil.
Total Assets was $596.7 Mil.
Property, Plant and Equipment(Net PPE) was $47.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $40.4 Mil.
Selling, General & Admin. Expense(SGA) was $473.4 Mil.
Total Current Liabilities was $174.1 Mil.
Long-Term Debt was $81.9 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(21.239 / 867.95)||/||(19.626 / 840.713)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(128.959 / 840.713)||/||(148.687 / 867.95)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (133.943 + 46.35) / 677.955)||/||(1 - (122.075 + 47.921) / 596.701)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(40.429 / (40.429 + 47.921))||/||(53.205 / (53.205 + 46.35))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(473.952 / 867.95)||/||(473.435 / 840.713)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((157.912 + 165.384) / 677.955)||/||((81.906 + 174.117) / 596.701)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(23.147 - -0.553||-||93.879)||/||677.955|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Vonage Holdings Corp has a M-score of -2.94 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Vonage Holdings Corp Annual Data
Vonage Holdings Corp Quarterly Data